What is liberalism?

Whatever it is, there’s more to it than David Laws would have you believe.

I was irritated by a piece Julian Glover wrote in the Guardian last week and meant to blog about it. An excellent post by Stuart White over at Next Left gives me an excuse to do so belatedly.

Glover was upbraiding Andrew Adonis, whom he described as "a liberal shoehorned into a statist party for the achievement of political purpose", for daring to criticise the decision by the Liberal Democrats to enter into a coalition with the Tories. Adonis had described the coalition as "unprincipled"; Glover appeared to suggest that there was no philosophical basis to Adonis's attack:

The differences within parties have often been as great as the differences between them. Adonis, a former Lib Dem, knows that. His objection -- like the predictable complaints of those Scottish former leaders Kennedy and Steel -- is not that Clegg did a deal, but that he did one with the wrong side. It is striking how the most vocal Labour critics of the coalition are New Labour: as if they mourn being cast adrift in a party whose deeper instincts they know only too well.

Yet the Lib Dem leader got better and more reliable terms from the Tories than he could have [had] from Labour; and, more than that, he has formed a government of broad ideological coherence, which he could not have done with an interim administration led by Gordon Brown.

This is, at its core, as much a liberal administration as a Tory one, joined by a shared scepticism about the effectiveness and financial sustainability of the centralised state.

There's a rather narrow understanding of liberalism implied here, though it is one that is consistent with that of the Orange Book faction of the Lib Dems, who, in the persons of David Laws and Nick Clegg himself, now hold sway in the party (and, indeed, in the coalition). Stuart White offers an excellent summary of this strain of contemporary liberalism:

Their thinking rests on some definite, strong -- albeit rather unexamined -- philosophical assumptions. Reading someone like David Laws, for example, there is at times a clear sense that the free market produces a distribution of income and wealth which is a kind of natural or moral baseline. It is departures from the baseline that have to be justified. Laws and other Orange Bookers are of course not libertarians, so they are prepared to allow that some departures -- some tax-transfers/tax-service arrangements -- can be justified. (This is the sense in which they remain social liberals, albeit not egalitarian ones.) But the presumption, for Laws, is clearly for "leaving money in people's pockets".

White's most important point is that there are resources in contemporary liberal political philosophy for a much more egalitarian, redistributive vision -- a vision of social justice, in other words. The basic assumptions of Orange Book liberalism, White says,

run completely counter to one of the basic claims of contemporary liberalism as developed in the work of such as Rawls, Dworkin and Ackerman.

For these thinkers, the "free market" is simply one possible "basic structure" for society along with an indefinite range of other possibilities. It has no morally privileged position. So how do we choose which "basic structure" to have? Their answer is that we try to identify principles of social justice and then design a basic structure -- including, if necessary, appropriate tax-transfer arrangements -- to achieve justice so understood. On this view, taxation and "redistribution" are not invasions into people's pockets, a taking of what is presumptively already, primevally "theirs". Tax transfers are a way of ensuring that people do not pocket, through the market, more (or less) than they are genuinely entitled to. Tax-transfer schemes define entitlement; they do not invade it.

Simplifying a little, one might say that for these liberal thinkers, it is not the free market that is the appropriate, morally relevant baseline, but equality: it is movement away from equality that has to be justified, not movement away from a free-market distribution.

And, Glover's little lesson in history and philosophy notwithstanding, this is something Andrew Adonis understands very well; though he is less likely to invoke Rawls, Dworkin or Ackerman than the great "social liberals" of the early 20th century -- men like J A Hobson or L T Hobhouse. As Hobhouse put it in his 1911 masterpiece, Liberalism, "The 'right to work' and the right to a 'living wage' are just as valid as the rights of person or property."

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Jonathan Derbyshire is Managing Editor of Prospect. He was formerly Culture Editor of the New Statesman.

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Stability is essential to solve the pension problem

The new chancellor must ensure we have a period of stability for pension policymaking in order for everyone to acclimatise to a new era of personal responsibility in retirement, says 

There was a time when retirement seemed to take care of itself. It was normal to work, retire and then receive the state pension plus a company final salary pension, often a fairly generous figure, which also paid out to a spouse or partner on death.

That normality simply doesn’t exist for most people in 2016. There is much less certainty on what retirement looks like. The genesis of these experiences also starts much earlier. As final salary schemes fall out of favour, the UK is reaching a tipping point where savings in ‘defined contribution’ pension schemes become the most prevalent form of traditional retirement saving.

Saving for a ‘pension’ can mean a multitude of different things and the way your savings are organised can make a big difference to whether or not you are able to do what you planned in your later life – and also how your money is treated once you die.

George Osborne established a place for himself in the canon of personal savings policy through the introduction of ‘freedom and choice’ in pensions in 2015. This changed the rules dramatically, and gave pension income a level of public interest it had never seen before. Effectively the policymakers changed the rules, left the ring and took the ropes with them as we entered a new era of personal responsibility in retirement.

But what difference has that made? Have people changed their plans as a result, and what does 'normal' for retirement income look like now?

Old Mutual Wealth has just released. with YouGov, its third detailed survey of how people in the UK are planning their income needs in retirement. What is becoming clear is that 'normal' looks nothing like it did before. People have adjusted and are operating according to a new normal.

In the new normal, people are reliant on multiple sources of income in retirement, including actively using their home, as more people anticipate downsizing to provide some income. 24 per cent of future retirees have said they would consider releasing value from their home in one way or another.

In the new normal, working beyond your state pension age is no longer seen as drudgery. With increasing longevity, the appeal of keeping busy with work has grown. Almost one-third of future retirees are expecting work to provide some of their income in retirement, with just under half suggesting one of the reasons for doing so would be to maintain social interaction.

The new normal means less binary decision-making. Each choice an individual makes along the way becomes critical, and the answers themselves are less obvious. How do you best invest your savings? Where is the best place for a rainy day fund? How do you want to take income in the future and what happens to your assets when you die?

 An abundance of choices to provide answers to the above questions is good, but too much choice can paralyse decision-making. The new normal requires a plan earlier in life.

All the while, policymakers have continued to give people plenty of things to think about. In the past 12 months alone, the previous chancellor deliberated over whether – and how – to cut pension tax relief for higher earners. The ‘pensions-ISA’ system was mooted as the culmination of a project to hand savers complete control over their retirement savings, while also providing a welcome boost to Treasury coffers in the short term.

During her time as pensions minister, Baroness Altmann voiced her support for the current system of taxing pension income, rather than contributions, indicating a split between the DWP and HM Treasury on the matter. Baroness Altmann’s replacement at the DWP is Richard Harrington. It remains to be seen how much influence he will have and on what side of the camp he sits regarding taxing pensions.

Meanwhile, Philip Hammond has entered the Treasury while our new Prime Minister calls for greater unity. Following a tumultuous time for pensions, a change in tone towards greater unity and cross-department collaboration would be very welcome.

In order for everyone to acclimatise properly to the new normal, the new chancellor should commit to a return to a longer-term, strategic approach to pensions policymaking, enabling all parties, from regulators and providers to customers, to make decisions with confidence that the landscape will not continue to shift as fundamentally as it has in recent times.

Steven Levin is CEO of investment platforms at Old Mutual Wealth.

To view all of Old Mutual Wealth’s retirement reports, visit: www.oldmutualwealth.co.uk/ products-and-investments/ pensions/pensions2015/